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When do groups perform better than individuals? A company takeover experiment

Author

Listed:
  • Marco Casari
  • Jingjing Zhang
  • Christine Jackson

Abstract

It is still an open question when groups perform better than individuals in intellectual tasks. We report that in a company takeover experiment, groups placed better bids than individuals and substantially reduced the winner’s curse. This improvement was mostly due to peer pressure over the minority opinion and to learning. Learning took place from interacting and negotiating consensus with others, not simply from observing their bids. When there was disagreement, what prevailed was not the best proposal but the one of the majority. Groups underperformed with respect to a “truth wins” benchmark although they outperformed individuals deciding in isolation.

Suggested Citation

  • Marco Casari & Jingjing Zhang & Christine Jackson, 2012. "When do groups perform better than individuals? A company takeover experiment," IEW - Working Papers 504, Institute for Empirical Research in Economics - University of Zurich.
  • Handle: RePEc:zur:iewwpx:504
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    References listed on IDEAS

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    1. Holt, Charles A & Sherman, Roger, 1994. "The Loser's Curse," American Economic Review, American Economic Association, vol. 84(3), pages 642-652, June.
    2. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
    3. Ball, Sheryl B. & Bazerman, Max H. & Carroll, John S., 1991. "An evaluation of learning in the bilateral winner's curse," Organizational Behavior and Human Decision Processes, Elsevier, vol. 48(1), pages 1-22, February.
    4. Brit Grosskopf & Yoella Bereby-Meyer & Max Bazerman, 2007. "On the Robustness of the Winner’s Curse Phenomenon," Theory and Decision, Springer, vol. 63(4), pages 389-418, December.
    5. Reinhard Selten & Klaus Abbink & Ricarda Cox, 2005. "Learning Direction Theory and the Winner’s Curse," Experimental Economics, Springer;Economic Science Association, vol. 8(1), pages 5-20, April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Haoran He & Marie Claire Villeval, 2014. "Are teams less inequality averse than individuals?," Post-Print halshs-01077253, HAL.
    2. repec:zbw:rwirep:0396 is not listed on IDEAS
    3. Bradfield, Anthony J. & Kagel, John H., 2015. "Legislative bargaining with teams," Games and Economic Behavior, Elsevier, vol. 93(C), pages 117-127.
    4. Jeanette Brosid-Koch & Timo Heinrich & Christoph Helbach, 2013. "Does Truth Win When Teams Reason Strategically?," Ruhr Economic Papers 0396, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    5. Cooper, David J. & Sutter, Matthias, 2011. "Role Selection and Team Performance," IZA Discussion Papers 5892, Institute of Labor Economics (IZA).
    6. Gary Charness & David J. Cooper & Zachary Grossman, 2020. "Silence is golden: team problem solving and communication costs," Experimental Economics, Springer;Economic Science Association, vol. 23(3), pages 668-693, September.
    7. Kugler, Tamar & Kausel, E.E. & Kocher, Martin G., 2012. "Are groups more rational than individuals? A review of interactive decision making in groups," Munich Reprints in Economics 18215, University of Munich, Department of Economics.
    8. Stöckl, Thomas & Huber, Jürgen & Kirchler, Michael & Lindner, Florian, 2015. "Hot hand and gambler's fallacy in teams: Evidence from investment experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 327-339.
    9. Charness, Gary & Cooper, David & Grossman, Zachary, 2015. "Silence is Golden: Communication Costs and Team Problem Solving," University of California at Santa Barbara, Economics Working Paper Series qt3n25b620, Department of Economics, UC Santa Barbara.
    10. He, Haoran & Villeval, Marie Claire, 2017. "Are group members less inequality averse than individual decision makers?," Journal of Economic Behavior & Organization, Elsevier, vol. 138(C), pages 111-124.
    11. Jingjing Zhang, 2012. "Communication in asymmetric group competition over public goods," ECON - Working Papers 069, Department of Economics - University of Zurich.
    12. Ambrus, Attila & Greiner, Ben & Pathak, Parag A., 2015. "How individual preferences are aggregated in groups: An experimental study," Journal of Public Economics, Elsevier, vol. 129(C), pages 1-13.
    13. Brosig-Koch, Jeannette & Heinrich, Timo & Helbach, Christoph, 2014. "Does truth win when teams reason strategically?," Economics Letters, Elsevier, vol. 123(1), pages 86-89.
    14. Haoran He & Marie Claire Villeval, 2014. "Are team members less inequality averse than individual decision makers?," Working Papers halshs-00996545, HAL.

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    More about this item

    Keywords

    Winner’s curse; takeover game; group decision making; communication; experiments;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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